Waikato Rugby Union will pay back its debt to the Hamilton city in full, with city councillors opting to waive an early repayment penalty.

In 2011 the council converted the struggling union's debt into a term loan with interest set at seven per cent.

The original council loan was $500,000 but, with payments, was whittled down to $341,025.

The rugby union had been paying the loan off at $22,386 a month.

Under the loan agreement, the WRU was allowed to pay the full amount of the loan but the repayment was subject to the union reimbursing council for any fees plus a charge equivalent to three-months' interest.

The council's finance and monitoring committee has agreed to a WRU request asking the council to waive its early repayment charges.

Council events and economic development general manager Sean Murray recommended council approve the waiver, describing it as a ''pragmatic'' decision.

Although the WRU had met all its payments ''a loan of this nature is still a risk'', he said.

Income from interest accrued from the loan was not factored into the council's long-term plan.

Deputy mayor Gordon Chesterman said the council had been able to help the rugby union out of a hole and benefited from seven per cent interest rates.

'It's a win-win situation,'' he said.

''I don't know anywhere in town you would be able to get seven per cent.''

Mr Chesterman said some ratepayers were critical of the council bailing out the union but they typically changed their mind once they understood the interest the council collected on the loan.

Councillor Peter Bos said the Waikato had enjoyed great rugby and sporting success this year which had generated a lot of pride in the region.

- © Fairfax NZ News